401(k) Audit Services in Long Beach, CA. For Long Beach, CA businesses offering their employees retirement plans, navigating a 401(k) audit can seem like a challenging process. Between regulation from the Department of Labor (DOL) and IRS, collecting extensive documentation, and ensuring that your plan doesn't favor higher-paid employees, it can be overwhelming. However, with the right support, the 401(k) audit does not need to disrupt your business and affect your daily business activities.
At Correct Capital, we understand that 401(k) audits can create significant headaches even though they are a regulatory requirement. Our team will assist you with every aspect of document collection to making sure Form 5500 is filed correctly and on time. Whether you're getting ready for your initial audit in Long Beach, CA, or hoping to optimize a previously inefficient process, we're here to minimize the hassle. You can ask for a meeting with a member of our advisor team, contact us online, or call us at 877-930-401(k) to get started.
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What is a 401(k) Audit?
A 401(k) audit is an yearly review necessary for Long Beach, CA companies with more than 100 eligible participants in their 401(k) plan. Note: Even if you do not have more than 100 employees actively contributing to the plan, you must still undergo an audit if there are 100 who are eligible. The audit confirms that the retirement plan adheres to the regulations mandated by the Department of Labor (DOL) and the Employee Retirement Income Security Act (ERISA). It reviews the plan’s financial integrity, ensuring that contributions, withdrawals, and operations are properly documented.
While required for regulatory purposes, 401(k) audits can be challenging and time-consuming. Correct Capital supports Long Beach, CA businesses prepare for these audits by aiding in document collection, ensuring comprehension of compliance testing, etc... With an experienced team in your corner, handling the audit process can become a much easier process.
Why are 401(k) Audits Necessary for Long Beach, CA Companies?
You are required to undergo a 401(k) audit for several reasons, to ensure retirement plans remain compliant with federal regulations and protect both the employer and employees. Here’s why they are required:
- Compliance with DOL and IRS Regulations: The purpose of audits is to confirm that your 401(k) plan follows all legal requirements set by the Department of Labor (DOL) and the IRS, with emphasis under the Employee Retirement Income Security Act (ERISA).
- Preventing Discrimination: The audit ensures that the plan disproportionately benefits higher-paid employees (often called “top-heavy” testing) to guarantee fairness across all participants.
- Identifying Operational Issues: Audits may reveal errors in employee contributions, withdrawals, or other aspects of plan management, enabling you to resolve these issues to avoid fines.
- Filing Form 5500: The audit ensures the accurate and on-time filing of Form 5500, a required document detailing the plan’s financial status, needed to uphold compliance with DOL and IRS regulations.
- Contribution Limits: The audit verifies that employer and employee contributions stay within IRS contribution limits, helping to avoid excess contributions that could lead to penalties.
- Fee Reasonableness: Auditors may review plan fees to ensure they are reasonable and not overly expensive for participants. Overpriced fees could lead to compliance concerns and negatively impact how employees' investments and savings perform.
- Fiduciary Oversight: The audit verifies that Long Beach, CA employers are serving the interests of plan participants, fulfilling their fiduciary responsibilities as mandated by ERISA.
- Verification of Plan Documentation: Verifying that the plan's documents, policies, and operational practices are consistent with regulatory guidelines is one of the most important parts of the audit.
Types of 401(k) Audits
There are two primary types of 401(k) Audits that Long Beach, CA employers may encounter, based on the specific details of their plan. These types of audits are determined by the structure of the retirement plan, as well as its investment and participant details.
- Full-Scope Audit: This is the most detailed audit necessary for most larger 401(k) plans. In a full-scope audit, the external auditor evaluates all components of the plan, including financial statements, adherence to Department of Labor (DOL) and IRS regulations, and participant data. The auditor reviews supporting documentation for contributions, distributions, and other transactions to verify that everything is accurate and in compliance.
- Section 103(a)(3)(C)) Audit: Formerly known as a "Limited Scope Audit," these apply to plans with investments overseen by a qualified, regulated financial institution (such as a bank or insurance company). The employer may qualify for a limited-scope audit. In this type, the auditor does not need to audit the investment information endorsed by the financial institution, which can substantially lower the audit’s complexity and cost. This can make it a better alternative for some Long Beach, CA businesses, as long as they meet the criteria.
The specific audit required is based on your plan’s unique features, like the nature of its investments. At Correct Capital, we will guide you to understand which type of audit your plan requires and ensure you're fully prepared for either process.
401(k) Audit Pain Points for Long Beach, CA Employers
While 401(k) audits are necessary for compliance, they can create major obstacles for Long Beach, CA employers, notably those managing larger plans. Here are some of the key pain points that companies deal with:
- Document Collection and Management: Collecting the right documents, such as account statements, tax returns, and employee data, can be labor-intensive. Employers frequently have difficulties to sort through and deliver the necessary paperwork, notably in the case of larger, more complex plans.
- Compliance with Changing Regulations: Remaining compliant with shifting DOL, IRS, and ERISA regulations can be challenging. Compliance oversights can cause audit failures, fines, and pricey amendments in the long run.
- Discrimination Testing: Verifying that the plan isn’t top-heavy demands thorough checks for compliance and can lead to additional documentation and reporting.
- Time and Resource Demands: Getting ready for an audit takes HR professionals, business owners, administrators, and others off of their core responsibilities, adding strain and shifting focus from everyday business tasks.
- Form 5500 and Timely Submissions: Many businesses face challenges when they file Form 5500 correctly and before the deadline, which plays a critical role in 401(k) compliance. Failing to meet the submission date can result in penalties and create further issues for the company.
At Correct Capital, we are aware of the difficulties involved and offer customized assistance to streamline the audit procedure in Long Beach, CA. Be it document collection or confirming conformity with regulations, our team helps take the burden off your shoulders.
401(k) Audits for Multiple Employer Plans (MEP) and Pooled Employer Plans (PEP)
For Long Beach, CA employers looking to lower the administrative burden of a 401(k) audit, Multiple Employer Plans (MEP) and PEPs can ease the process. These plans enable different employers to participate in a unified 401(k) plan, often eliminating employer-specific audits.
- Multiple Employer Plans (MEP): These plans combine several unrelated employers into one 401(k) plan, lowering the expenses and simplifying the management of managing and auditing individual plans. This setup allows Long Beach, CA businesses to distribute the administrative responsibilities and often sidestep the annual 401(k) audit altogether.
- Pooled Employer Plans (PEP): A more recent development, PEPs enable unrelated employers to enter a unified 401(k) plan overseen by a pooled plan provider (PPP). This structure streamlines the regulatory process and lowers expenses, making it appealing for Long Beach, CA businesses seeking to simplify their retirement offerings.
Both MEPs and PEPs can significantly reduce audit-related costs and time commitments, all while maintaining adherence to regulations. Switching to these types of plans may be particularly attractive for small companies in Long Beach, CA, who want to offer a 401(k) but find the costs and paperwork challenging.
Working with the Right Long Beach, CA 401(k) Audit Team
401(k) audits can appear challenging, but selecting the proper assistance can make all the difference. Partnering with professionals that is well-versed in both the technicalities and practicalities of the audit process can save you significant time and stress. Here’s why working with the right specialists is crucial:
- Experience and Expertise: A highly experienced group will be familiar with the details of 401(k) audits, including both full-scope and limited-scope audits. We can guide you through the documentation process and highlight areas for enhancement within your plan.
- Compliance Assurance: The right team ensures you keep up with evolving regulations, making sure your plan complies with all required guidelines.
- Tailored Support: Each 401(k) plan has unique requirements. An experienced team will collaborate with you to understand the unique needs of your plan and help you prepare for your specific audit requirements. Correct Capital handles more than 37 plans in both small and large companies, and represents over $212 million in total plan assets across the United States, giving us the expertise to handle any company 401(k) plan.
- Saving Time and Resources: Preparing for a 401(k) audit can consume a lot of time from day-to-day operations. The ideal support will shoulder a lot of the admin work, enabling your HR and finance teams the freedom to concentrate on other tasks. Correct Capital makes the process smoother, easing the load for your internal team.
- MEPs and PEPs Expertise: For businesses enrolled in an MEP or PEP, while an separate audit is no longer necessary, you're still obligated to adhere to all the rules and regulations, though with a reduced administrative workload after plan year end.
*as of March 2024
Collaborating with a experienced, reliable team is essential to making sure your 401(k) audit in Long Beach, CA is as painless as possible. With Correct Capital by your side, you’ll have the confidence that your audit will be conducted thoroughly and on time.
Call Correct Capital for Help With Your 401(k) Audit in Long Beach, CA
Meeting 401(k) audit requirements is both a regulatory obligation and an opportunity to ensure your Long Beach, CA company's retirement plan remains as beneficial as possible to your employees. Correct Capital’s experience in assisting Long Beach, CA businesses navigate the 401(k) audit helps ease the burden, enabling you to concentrate on your operations while avoiding fines for non-compliance.
Contact Correct Capital today to book a meeting and let us help you ensure your audit goes smoothly and efficiently. Our team of experts will help with all aspects from document collection to compliance checks, ensuring your plan is fully optimized. You can schedule a meeting with a member of our Long Beach, CA advisor team, contact us online, or call us at 877-930-401(k) to start the process.
